A significant move lower in USD/MXN did come to fruition in November. Economists at Rabobank analyze the pair’s outlook.

USD/MXN will remain at the mercy of interest rate differentials

• Mexican Peso slides vs. the US Dollar ahead of a busy week for Mexico and the United States.
• Mexico’s economic docket will feature Industrial Production and the Bank of Mexico's monetary policy decision.
• USD/MXN traders are awaiting the US inflation report alongside the Federal Reserve’s decision.

Mexican Peso (MXN) starts the week with a negative tone and loses traction against the US Dollar (USD) in early morning trading during the North American session. The economic docket during the week across both sides of the borders will feature monetary policy decisions by the US Federal Reserve (Fed) on Wednesday and the Bank of Mexico (Banxico) on Thursday. Both central banks are expected to keep rates unchanged despite uncertainty about the Fed’s tone on their monetary policy statement. The USD/MXN is trading at 17.43, posting gains of 0.60% on the day.

Last week’s economic data from Mexico depicted the disinflation process continuing at a time when some of Banxico’s Governors had opened the door to ease monetary policy. However, they stressed that discussions will begin in the first quarter of 2024. On the US front, a tight labor market led to decreasing expectations for rate cuts by the Fed next year.

Daily digest movers: Mexican Peso trades with losses at the beginning of a busy week

• Mexico’s inflation on the producer and consumer side diverged. However, prices continue to ease, increasing the chances for rate cuts by Banxico, as Governor Victoria Rodriguez Ceja and Deputy Governor Jonathan Heath have suggested.
• Nevertheless, there is a dissenter as Deputy Governor Irene Espinosa pushed back and said inflationary risks are growing.
• China’s latest Consumer Price Index (CPI) report paints a deflationary scenario in the second-largest economy worldwide, spurring flows toward safe-haven currencies.
• The US Dollar Index (DXY) is bolstering the USD/MXN pair, with the DXY gaining 0.10%, up at 104.09, underpinned by elevated US Treasury bond yields.
• The US 10-year benchmark note rate is up three basis points at 4.262%.
• US jobs market data was mixed, indicating the labor market is cooling down at a slow pace. Following last week’s US Nonfarm Payrolls report for November, traders slashed the odds for potential rate cuts by the US Federal Reserve for next year.
• Ahead in the week, Mexico’s economic docket will feature Industrial Production for October and Banxico’s monetary policy decision on December 14.
• On the US front, inflation figures on the consumer and producer side will be released ahead of the Federal Reserve’s last decision of the year. After that, the unemployment claims, Industrial Production, and Fed Regional Manufacturing Indices will be released.

Technical analysis: Mexican Peso on the defensive as USD/MXN climbs towards 17.50

The USD/MXN daily chart shows the pair is gathering upward momentum, above the 100-day Simple Moving Average (SMA) at 17.39, which could pave the way for further upside. Nevertheless, buyers must reclaim the 17.50 psychological figure so that the exotic pair can challenge the 18.00 mark. On its way toward the latter, buyers must regain the 200-day SMA at 17.54, followed by the 50-day SMA at 17.67.

Contrarily, if USD/MXN sellers drag prices below the 100-day SMA, they could remain hopeful the pair could slump further. The first support would be the 17.00/05 area, before challenging the current current’s year low of 16.62.

• The Swiss Franc weakens in most pairs as stronger US data continues to buoy market sentiment.
• Swiss Franc is a safe-haven currency which tends to appreciate in times of crisis. 
• The Federal Reserve, European Central Bank and Bank of England are all scheduled to make announcements after their meetings this week. 

The Swiss Franc (CHF) edges lower in most pairs on Monday as investors digest the strong US labor market data and bide their time ahead of the action expected later in the week when several major central banks will make their policy decisions. 

The improved outlook for the US on the back of Friday’s strong jobs report has lent a mildly positive air to sentiment, providing a slight headwind to the safe-haven Swiss Franc.

Daily digest market movers: USD/CHF edges higher ahead of US CPI data and Fed meeting

• The Swiss Franc continues to edge lower versus US Dollar (USD) on Monday after the release of the US Nonfarm Payrolls report for November showed an above-expectations improvement in most metrics, including the Unemployment Rate, which fell to 3.7% from the 3.9% forecast. 
• The data indicates the US economy is healthier than many economists had thought and that fresh inflationary pressures may still emerge. 
• This could make the US Federal Reserve (Fed) keep interest rates higher for longer and delay any rate cuts the market was anticipating in 2024. 
• Higher-for-longer interest rates will benefit the US Dollar since they attract higher capital inflows.
• The next big data release for the US Dollar is US CPI data for November, scheduled for release at 13:30 GMT on Tuesday, December 12.  

Swiss Franc technical analysis: USD/CHF continues short-term bullish trend

USD/CHF – the number of Swiss Francs that one US Dollar can buy – continues to gently push higher on Monday. 

The pair is rising after having completed a Measured Move price pattern during October and November. Measured Moves are three wave patterns that look like large zig-zags. The first and third waves are usually of a similar length. Wave C completed after achieving the same length as A. This further reinforces the bullish reversal since the December 4 lows.

US Dollar vs Swiss Franc: Daily Chart

The MACD has completed a bullish cross (circled) in negative territory, adding more evidence, signaling potentially more upside on the horizon.

The short-term trend is bullish, and more gains are possible. The 0.8825 target, which offers soft resistance, has almost been met. If surpassed, prices could rise to the confluence of major moving averages residing at 0.8900, where tougher resistance is expected.  

A break below the 0.8667 lows would negate the recovery and see bears back in charge, with likely losses to the 0.8552 July lows. 

Daily digest market movers: EUR/CHF trades flat ahead of ECB meeting

• The Swiss Franc reverses a weak open and edges higher against the Euro on Monday. 
• Euro traders are waiting for the European Central Bank (ECB) meeting later in the week. 
• Lower-than-expected Eurozone inflation data as a whole suggests a risk the European Central Bank will cut interest rates, which is limiting gains for the Single Currency.
• The next main event for the Euro is the European Central Bank policy meeting on Thursday, December 14. 
• The most recent Inflation release from Germany came out in line with expectations, with the country’s Harmonized Index of Consumer Prices (HICP) rising 2.3% YoY in November but falling 0.7% MoM, according to data from the Federal Statistics Office of Germany.
• Lower interest rates, or their expectation, tend to weaken a currency as they reduce capital inflows. 

Swiss Franc technical analysis: EUR/CHF edges lower after run-up

EUR/CHF – the number of Swiss Francs that one Euro can buy – trades flat after bottoming on December 7. 

Last Thursday’s Bullish Engulfing Japanese candlestick reversal pattern (see rectangle on chart below) at the level of a major support and resistance level was confirmed by the green bullish day on Friday. This provides a short-term bullish signal for the pair.

Euro vs Swiss Franc: Daily Chart

The pair has also probably reversed trend in the short-term, suggesting bulls have the upper hand temporarily. The medium and long-term trend, however, are still probably bearish, suggesting a risk of recapitulation remains. 

A break below the 0.9403 lows would reconfirm the bearish bias and see prices fall into uncharted territory, with major whole numbers then expected to provide support at 0.9300, 0.9200, and so on.

Daily digest market movers: GBP/CHF rises as risk appetite favors Sterling

• The Swiss Franc falls versus the Pound Sterling (GBP) pair on Monday as strong US labor market data eases global recession fears, supporting riskier currencies like the Pound Sterling over safe-havens such as the Swiss Franc.
• Pound Sterling traders are now awaiting the Bank of England (BoE) meeting on Thursday for a steer on the future course of interest rates in the UK. 
• Higher interest rates, or their expectation, are generally positive for a currency as they attract greater inflows of foreign capital. The opposite is true of lower interest rates.  
• The market view of the course of future interest rates in the UK has turned more dovish recently, in line with most of the rest of the world. Traders in interest rate futures saw a relatively high chance of the BoE cutting interest rates by 0.75% (three 0.25% cuts) in 2024, as per data reported on Thursday, December 7. 

Swiss Franc technical analysis: GBP/CHF rising from range lows

GBP/CHF – the number of Swiss Francs that one Pound Sterling can buy – is rising within sideways short and long-term timeframes – the medium-term trend, meanwhile, could be classified as marginally bullish. 

On the 4-hour chart used to analyze the short-term trend, the pair continues to bounce higher within the parameters of a range-corridor between 1.0990 and 1.1155. 

Pound Sterling vs Swiss Franc: 4-hour Chart

 It is possible to see the outline of a complete measured move in the zig-zag of price action down from the November 29 high, with wave C completing at the November 7 low. 

The MACD has risen above its signal line whilst well below the zero line, further adding weight to the short-term bullish outlook. Indeed, looked at throughout December, the MACD looks like it might have formed a wide double-bottom bullish reversal pattern, further amplifying the strength of the bullish crossover buy signal.

All in all, the short-term chart suggests the GBP/CHF pair is in the midst of a bullish ascent back up to the range highs at 1.1155. A break above the 1.1040 level would provide further confirmatory evidence a new leg higher was underway.

A combination of better risk appetite and lower US yields has driven the USD weaker. Economists at HSBC analyze Greenback’s outlook.

High hurdles for sustained weakness

The Bank of England (BoE) will announce its Interest Rate Decision on Thursday, December 14 at 12:00 GMT and as we get closer to the release time, here are the expectations forecast by the economists and researchers of eight major banks.

The BoE is set to keep the benchmark rate unchanged for a third consecutive meeting at 5.25%. The “Old Lady” is also likely to push back against market easing expectations. 

Deutsche Bank

Rabobank

TDS

SocGen

ING

Wells Fargo

Citi

BMO

The European Central Bank (ECB) is set to announce its Monetary Policy Decision on Thursday, December 14 at 13:15 GMT and as we get closer to the release time, here are the expectations as forecast by the economists and researchers of 10 major banks.

The benchmark interest rate is set to remain at 4.50%. Updated macro forecasts will be released. Inflation expectations are set to be revised down. President Lagarde’s comments will be closely monitored looking for dovish hints.

Rabobank

Deutsche Bank

TDS

SocGen

Wells Fargo

Citi

ANZ

Nordea

BMO

Swedbank

The US Federal Reserve will announce its Interest Rate Decision on Wednesday, December 13 at 19:00 GMT and as we get closer to the release time, here are the expectations as forecast by analysts and researchers of 10 major banks. 

It is a widely expected hold for a third consecutive meeting but the Fed is likely to push firmly back against elevated rate cut hopes. New macro forecasts and Dot Plots will be released. A Jerome Powell press conference will follow the statement release.

ANZ

Deutsche Bank

Rabobank

TDS

Nordea

SocGen

ING

Citi

CIBC

Westpac

The US Bureau of Labor Statistics (BLS) will release the most important inflation measure, the US Consumer Price Index (CPI) figures, on Tuesday, December 12 at 13:30 GMT. As we get closer to the release time, here are the forecasts by the economists and researchers of 10 major banks regarding the upcoming United States inflation print for November.

Headline CPI is expected to fall a tick to 3.1% year-on-year while Core is expected to remain steady at 4.0% YoY. On a monthly basis, headline inflation is seen accelerating by 0.1% vs. the prior release of 0% while Core CPI is also expected to rise a tick to 0.3%.

ANZ

Commerzbank

Deutsche Bank

NBF

TDS 

SocGen

Wells Fargo

Citi

CIBC

Westpac

• The Yen dives as on dovish comments by BoJ officials.
• Dwindling hopes of Fed cuts are underpinning support for the USD.
• USD/JPY is likely to find resistance at the 146.85 area.

The US Dollar is extending its recovery, as comments from BoJ officials have poured cold water on investors’ expectations that the bank could end its ultra-loose policy after their December meeting.

Dovish comments from BoJ officials hit the Yen

News reports citing Bank of Japan’s officials suggest little need to end the negative rates policy, as there is not enough evidence that wage growth would support sustainable inflation.

This has provided an additional impulse to the pair, already on recovery after Friday’s US Nonfarm Payrolls report. 

The US economy created more jobs than expected in November, unemployment receded and wage inflation accelerated. The evidence of a resilient US labour market crushed market expectations of Fed rate cuts in early 2024 and sent US yields and the US Dollar higher.

USD/JPY approaches a key resistance area at 146.75

The pair is now testing a previous support level at the 146.30 area. Beyond here, the 50% retracement of the pair’s decline from mid-November high meets trendline resistance at 146.85. The pair is likely to meet strong resistance at that level.

On the downside, supports are 145.30 and 143.75.

Technical levels to watch

USD/JPY dropped a large 2% last Thursday for the biggest one-day drop since January. Economists at MUFG Bank analyze Yen’s outlook.

Any near-term renewed JPY selling will not last

• The Yen dives as BoJ officials talk down hopes of an imminent exit of its ultra=-oose policy
• Higher US Yields after the strong US NFP are adding negative pressure on the Yen.
• EUR/JPY is seen below 150.00 at the beginning of next year – MUFG.

The Yen is dropping across the board on Monday weighed by reports that have cooled off hopes the bank might signal the exit of its ultra-loose policy after next week’s meeting.

BoJ officials cool hopes of an exit from negative rates

Market sources reported that Bank of Japan officials see little need to end the negative rates policy. This has poured cold water on the market expectations that the bank would approve a major monetary policy shift at its December 19 meeting, and has sent the Yen tumbling across the board.

In the absence of relevant macroeconomic data today, this news, combined with the higher US yields following the strong US employment data seen last week, is likely to keep the JPY on the back foot in the coming sessions.

EUR/JPY seen below 150.00 early next year – MUFG

From a wider perspective, the Technical analysis team at MUFG sees the Euro trending lower over the next weeks: “Weak fundamentals make it harder for ECB to push back against market expectations for earlier and deeper rate cuts next year (...) We expect EUR weakness to be more pronounced against the JPY resulting in EUR/JPY falling back below the 150.00 level by early next year.”

Technical levels to watch

USD holds December gains ahead of a busy week of data and FOMC. Economists at Scotiabank analyze Greenback’s outlook.

There is still time for gains to reverse

USD/CAD is marking time trading around the 1.36 point. Economists at Scotiabank analyze the pair’s outlook.

Risks are tilted to the downside

• The Kiwi finds buyers at 0.6100 although it remains capped below 1.6130 so far.
• Strong US data and concerns about China are weighing on the NZD.
• US Dollar losses are likely to remain limited ahead of US CPI and the Fed’s meeting.

US Dollar weakness, however, is likely to remain limited after US NFP data from Friday highlighted the resilience of the US labour market and curbed hopes of Fed cuts in early 2024.

Data released over the weekend showed that China’s Consumer Prices grew at their slowest pace in three years, adding concerns about the frail momentum of the world’s second-largest economy and hurting the China-proxy NZD.

The calendar is light today with traders awaiting Tuesday’s US CPI data and Wednesday’s Fed’s monetary policy decision to shed some more light on the bank’s next monetary policy steps.

Technical indicators are turning lower with price action below the 4h 50 SMA and hovering above the 100 SMA. Support at 0.6130 is capping bulls so far, closing the path towards 0.6190 and 0.6225.

Failure to regain 0.6130 would increase pressure towards 0.6050 and 0.6000.

Technical levels to watch

Sterling is sitting on top of the daily performance league for the major currencies. Economists at Scotiabank analyze Cable’s outlook.

Price action is looking constructive from a technical point of view

• The US Dollar is up near 1% against the Japanese Yen.
• Traders will keep their powder dry towards FOMC on Wednesday. 
• The US Dollar Index holds above 104 and has more room to go higher.

The US Dollar (USD) is riding the reversal wave against last week’s turbulence that sparked after comments from Bank of Japan (BoJ)’s Chairman Kazuo Ueda who said that the end of negative monetary rates was near. This Monday morning, several headlines read that the BoJ sees little need to end negative rates in December. As a result, the Greenback takes back a lot of lost ground from the Yen’s move from last week, and is up 1% in early Monday trading. 

On the economic front, besides CPI on Tuesday, traders will mainly look forward to Wednesday when the Fed will kick off ahead of Super Thursday, when no less than three major central banks will issue their last monetary policy for 2023 (four with Fed included). 

Daily digest: Standstill ‘till Wednesday

• A possible main driver for the sudden backtracking on changing its monetary policy at the BoJ, could have come with the drop of 13.6% year-on-year in Machine Tool Orders for Japan. 
• Meanwhile Chinese markets are trembling as deflation fears are soaring. With a big focus on central banks this week, the European Central Bank could be facing a similar issue as inflation is sinking very rapidly in the region and the ECB already guided markets that it will not cut quick. 
• The US Treasury is the main driver this Monday in the economic calendar with no less than four debt issuances. 
  1. Near 16:30 GMT both a 3-month and a 6-month bill will be auctioned.
  2. At 18:00 GMT a 10-year and a 3-year note will be allocated. 
• Equites are flying in Asia after the statement from the BoJ. Japan has closed its Nikkei up 1.50% and the Topix at 1.47%. The already closed Hang Seng was able to erase an early 1.6% loss to close this Monday up 0.5%. European equities are not sure what to make off all these messages out of Asia and are flat for this Monday, together with US futures. 
• The CME Group’s FedWatch Tool shows that markets are pricing in a 97.7% chance that the Federal Reserve will keep interest rates unchanged at its meeting next week.  
• The benchmark 10-year US Treasury Note trades near 4.25%, a substantial leg higher than last week. The recent US Jobs Report from last Friday revealed a persistent uptick in wages and another drop in unemployment, which opens the risk for persistent inflation. 

US Dollar Index technical analysis: Pressure is building

The US Dollar is gearing up for a comeback in this last trading week of the year under normal trading regime. This means that the last volatile moves in the Greenback and its US Dollar Index (DXY) will be unfolding this week. From a pure technical point of view, the DXY looks set to end this year near 105. 

The DXY is recouping losses against the Japanese Yen, one of its main constituents, and is up by 1% in the USD/JPY pair. The DXY trades above 104 and would attract more volume if it was able to break above the high of Friday at 104.26. Once from there, the 100-day Simple Moving Average (SMA) near 104.55 looks very appealing to head toward prior to ahead of Wednesday’s Fed meeting. 

To the downside, the 200-day SMA has done a tremendous job in supporting the DXY with buyers coming in below 103.56 and pushing it back towards that same level near the US closing bell. If it fails this week, the lows of November near 102.46 is a level to watch. More downside pressure could bring into view the 100 marker, in a case where US yields sink below 4%.

EUR/USD holds modest gains through upper 1.07s. Economists at Scotiabank analyze the pair’s outlook.

Short-term bear trend resistance is very close

• The Dollar consolidate recent gains, steady above 0.8780.
• The strong NFP report has provided a fresh impulse to the USD.
• Investors looking from the sidelines ahead of US CPI and the Fed.

The Greenback is trading with a moderately bid tone during the European morning session, consolidating recent against, with downside attempts contained above last week’s peak at 0,8780.

US employment data has given a fresh boost to the Dollar

The pair keeps drawing support from the upbeat US Nonfarm Payrolls data seen on Friday, which have curbed market expectations of Fed cuts in the first quarter of Next year.

With this in mind, investors remain in a cautious mood on Monday awaiting the release of US CPI figures on Tuesday and the outcome of the Federal Reserve monetary policy meeting on Wednesday.

The Fed is widely expected to leave its benchmark rate at the current 5.5% thus the focus will be on the interest rate projections and the tone of Fed Powell’s press conference. If US inflation drops more than expected, the market will be looking for dovish hints by Powell to sell US Dollars.

The technical picture shows the Dollar in an upside correction after having depreciated 4.5% in November. The next upside targets are 0.8820 and the 50% retracement of November’s swell-off, at 0,8885.

On the downside, supports are 0.8780 and 0.8730.

Technical levels to watch

The EUR has weakened sharply since the end of last month. Economists at MUFG Bank analyze Euro’s outlook.

Room for EUR to weaken further especially vs. JPY

• Natural Gas drops 6% in European trading with EU storages still above 80%.
• Natural Gas prices are heading to $2 at this pace.
• The US Dollar is steady ahead of US CPI and the last Fed’s policy meeting for 2023.

Natural Gas (XNG/USD) is sinking as traders abandon ship this Monday in European trading. A buildup of different elements is pushing Natural Gas prices into a correction. China is set to struggle with deflation as demand is hitting rock bottom, while Europe could be facing the same issue after the too quick decline in inflation numbers recently and ahead of the European Central Bank meeting this Thursday. With European Gas storages filled up above 80% and weather forecasts pointing to mild temperatures in the coming two weeks, there is very little to almost no chance the EU will run out of Gas for this winter season. 

Meanwhile, the US Dollar (USD) is strengthening this Monday with one of its counterparts, the Japanese Yen, weakening again. Its central bank, the Bank of Japan, issued a statement which contradicts earlier comments which drove the Japanese Yen higher against the US Dollar and triggered substantial down moves in the US Dollar Index. That same US Dollar Index (DXY), is back to where it was earlier last week, ahead of the last US Federal Reserve meeting for 2023, taking place on Wednesday. 

Natural Gas is trading at $2.34 per MMBtu at the time of writing.  

Natural Gas market movers: Oversupply during winter

• More Asian Gas traders are demanding trading licences in London to set up shop. China is facing deflation, which means less demand for Liquified Natural Gas (LNG). Asian traders are now trying to offload surplus volumes in Europe where dependency on imports is still very high. 
• The Futures markets are pricing in more downturn for gas demand in Europe, with January futures being priced below April prices at the moment. 
• Weather forecast models are seeing no negative temperatures for the coming two weeks in Europe. 
• Recent congestion issues at the Panama Canal are continuing, with Gas tankers blocked in the region not posing any supply risk as those volumes have already been replaced or allocated with other third-party supplies. 

Natural Gas Technical Analysis: Snow is off 

Natural Gas is sinking and it is difficult to find any bottom that might help its downturn at the moment. The decline is a sum of factors which all point to one and the same issue: demand is absent. European tanks are still very much full and equipped to pass this winter without any hiccups. Meanwhile Chinese demand is turning into oversupply and traders are now seeking other regions to offload the surplus. 

Should the weather models be wrong and several days of severe frost take a grip of mainland Europe, expect the reserves to erode quite quickly and additional supply might be needed. Expect to see a return to the purple line near $2.60 as the first hurdle. Next the 200-day Simple Moving Average (SMA) at $2.74 will act as a resistance before allowing Gas prices to soar to $3 with the 100-day SMA nearby. 

Traders are facing further discounts in nearterm expirations in Futures contracts, which means more downside to come as buyers will wait for further declines before starting to buy. Small support could be seen near $2.20, with the low of June. Though, rather expect to see firm support coming in near $2.10, at the low of April from this year, at the yellow supportive line. 

XNG/USD (Daily Chart)

Sterling has enjoyed November. Economists at ING analyze GBP outlook ahead of the Bank of England (BOE) meeting.

EUR/GBP should head back up to the 0.88 area next year

• The pound picks up on Monday with the USD losing steam.
• Cooling hopes of Fed cuts are likely to keep US Dollar losses limited.
• GBP/USD is expected to meet resistance at 1.2600.

The Sterling is trimming some losses on Monday’s European session, with the US Dollar losing upside momentum. The broader bearish trend, however, remains active, with investors cautious ahead of key UK data and major central banks’ decisions.

US employment data has boosted the US Dollar

US employment data boosted the Dollar last Friday, with the Nonfarm payrolls beating expectations and wages growing too fast to allow the Federal Reserve to start cutting rates in the coming months. This is likely to cushion US Dollar declines over the coming sessions.

In the calendar, Tuesday’s UK Employment data and the US CPI will attract the market focus ahead of the all-important Fed monetary policy meeting on Wednesday.

The US central bank is expected to leave its benchmark rate on hold. The main attraction of the event will be the MPC members’ interest rate projections and Powell’s press conference for hints about any dovish turn that would hurt the US Dollar.

On Thursday, the BoE will keep rates on hold, with BoE Bailey expected to give more info about the bank’s next steps.

GBP/USD rebound to meet resistance at 1.2600

The technical picture shows the pair gathering bullish strength, yet still below 1.2600 resistance, which would negate the near-term corrective mood, and expose 1.2650 ahead of the mentioned 1.2730.

On the downside, supports are Friadau’s low at 1.2500 and November 22 low at 1.2450.

Technical levels to watch

The US Dollar surged higher post Nonfarm Payrolls. Economists at TD Securities analyze Greenback’s outlook.

Looking for USD downside in the medium-term

• Gold is under increasing bearish pressure after breaching the $2,000 level.
• Strong US employment figures have boosted US yields and the USD, weighing on Gold.
• Investors are cautious awaiting the outcome of the Fed’s monetary policy meeting.

Gold prices (XAU/USD) have opened the week in the same bearish tone seen at the end of the previous one. Friday’s upbeat US Nonfarm Payrolls (NFP) report, dampened investors’ hopes of Federal Reserve (Fed) cuts in early 2024, giving a fresh boost to US yields, to the detriment of the yieldless precious metal.

Bullion remains depressed below the $2,000 psychological level in the European trading session with traders in a cautious mood, awaiting US inflation data on Tuesday and the outcome of the Fed’s monetary policy meeting due on Wednesday.

Investors' sentiment is frail on Monday following the downbeat consumer inflation data from China over the weekend. The country’s CPI has shown its lowest growth in the last three years, reviving concerns that the uncertain situation in the world’s second-largest economy may bring global growth lower next year.

Beyond that, the escalating tensions in the Middle East are contributing to weigh on risk appetite, as we head into a week packed with central banks' decisions, starting with the Federal Reserve, on Wednesday.

Daily Digest Market Movers: Gold is turning lower with US yields and the US Dollar higher

• US employment beat expectations on Friday, with wage inflation rising well above expectations. This has curbed hopes of Fed cuts, giving a fresh boost to the US dollar and weighing on Gold.
   
• US Nonfarm Payrolls increased by 199K in November, beating expectations of a 180K rise, following a 150K increment in October.
   
• Hourly earnings accelerated 0.4%,m above the 0.3% market consensus from October’s 0.2%. This adds pressure to consumer prices and casts doubts about Fed cuts in the near term. 
   
• According to the CME Group FedWatch Tool, futures markets are now pricing a 40% chance of a rate cut in March 2024, from the nearly 60% probability seen before the US NFP report.
   
• The US yields have bounced higher, with the benchmark 10-year US Treasury yield regaining 15 bps after the US NFP release and dragging the US Dollar higher and Gold lower with them.
   
• News, reporting attacks on US troops by Iran-backed militias in Iraq and Syria, is increasing fears about an escalation of the Gaza conflict, contributing to underpinning support to the safe-haven US Dollar.
   
• Traders are now looking at US consumer inflation figures ahead of the Fed's interest rate projections for more info about the bank’s monetary policy plans.

Technical Analysis: Gold looking increasingly vulnerable below $2,000

The technical picture shows Gold prices under increasing bearish pressure after breaching the $2,000 psychological level. The pair has breached below the 50 and 100 SMAs in 4-hour charts and is now pushing against the 200 SMA.

Further downtrend will push the precious metal towards a key support area at $1,982, where the 50% Fibonacci retracement of the October - December rally meets the neckline of a Head and Shoulders (H&S) pattern.

This is a common figure for trend shifts. A clear break of the neckline level would put bears in control, aiming for mid-November lows, at $1,934 ahead of $1,838 and the measured target of the H&S pattern at $1,851.

On the upside, above $2,000, the pair would meet resistance at $2,020 previous support, and $2.040.

 

The Pound remains the second best performing G10 currency in the year to date after the CHF. Economists at Rabobank analyze GBP outlook.

Scope for a little more outperformance of GBP vs. the EUR

Dollar, bond yields carry over gains from Friday. Economists at Société Générale analyze EUR/USD ahead of Fed and ECB meetings. 

Fed and ECB in focus for comments on market pricing of rate cuts

USD/JPY has dropped back significantly from its recent highs. Economists at Rabobank analyze the pair’s outlook.

USD/JPY to shift lower in the second half of next year

Economists at Société Générale analyze EUR/NOK technical outlook.

Lack of clear direction

• The Dollar remains stronger as the US NFP cooled hopes of Fed cuts
• Monetary policy decisions by the Fed and the ECB to set the pair’s direction this week.
• EUR/USD might dip to 1.05 in the coming quarter – Rabobank.

The Euro has opened the week in the same bearish tone seen during the previous one. The pair seems unable to put a significant distance from Friday’s lows, with the US Dollar buoyed by the upbeat US employment report.

Central Banks in the spotlight

Friday’s Nonfarm Payrolls beat expectations, laying bare the resilience of the US labour market and wage inflation accelerated, pouring cold water on investors’ hopes of Fed cuts early next year. This gave a fresh impulse to the US Dollar.

This week the main focus will be on Tuesday’s US CPI data ahead of Wednesday’s Federal Reserve’s monetary policy decision. The bank is widely expected to leave rates on hold at 5.5%, thus the interest will be on the interest rate projections and in the tone of chairman Powell’s comments.

On Thursday, the focus will shift towards the ECB. The benchmark interest rate will remain at 4.5% and, again, investors will be looking for dovish hints on President Lagarde’s comments as the weak economic growth and cooloing inflation have boosted hopes of rate cuts in early 2024.

The Euro could reach 1.05 in the coming quarter – Rabobank

The Technical Analysis Team of Rabobank see the pair extending its downtrend in the coming months: “ If the ECB can contain inflation going forward, a weaker EUR could help support the reforms needed to boost the competitiveness of the EU (...) On a 1-to-3-month view, we see the potential for EUR/USD to dip back to the 1.05 region.” 

Technical levels to watch

• WTI gained ground on the back of solid US economic data released on Friday.
• US has initiated the purchase of up to three million barrels of Crude oil for the SPR.
• The output growth in non-OPEC countries could exceed the supply in 2024.

West Texas Intermediate (WTI) trims its intraday profits, struggling to continue its winning streak for the third successive session. The WTI oil price trades lower around $71.40 per barrel during the European session on Monday.

Crude oil prices witnessed an upswing after last week's data release, revealing a certain level of resilience in the United States (US) economy. The robust employment data on Friday played a crucial role, depicting the labor market as one of the few positive aspects in the world's largest fuel consumer.

The recent decline in WTI oil prices has spurred demand from the US, which has initiated the purchase of up to three million barrels of Crude oil for the Strategic Petroleum Reserve (SPR), with delivery scheduled for March 2024. This move comes after the SPR reached a nearly 40-year low over the past year.

Despite the commitment of the Organization of the Petroleum Exporting Countries and allies (OPEC+) to reduce production by 2.2 million barrels per day (bpd) in the first quarter of 2024, investors remain skeptical that this will lead to a significant drop in supply. The anticipation of output growth in non-OPEC countries is causing concerns about excess supply in the coming year.

Additionally, concerns about deflation in China, the leading oil importer, along with a Consumer Price Index (CPI) and Producer Price Index (PPI) that didn't meet expectations, added to the downward pressure on Crude oil prices. Recent data revealed that China's oil imports dropped to a four-month low in November, reflecting high stockpiles and subdued fuel demand.

WTI oil traders adopt a cautious stance in anticipation of the Federal Reserve's (Fed) upcoming interest rate decision. The consensus expectation is that the Fed will keep interest rates stable at 5.5% in its forthcoming monetary policy statement on Wednesday. Additionally, the market also focuses on the API Weekly Crude Oil Stock data for the week ending on December 8, which will be closely observed on Tuesday for potential market impacts.

Economists at Rabobank expect the AUD/USD pair to rise throughout the next year. 

Interest rate differentials look set to offer AUD support through much of next year

• USD/CAD grapples to hold ground near 1.3590 despite upbeat US Dollar.
• A break above 1.3600 could lead the pair to reach a 38.2% Fibonacci retracement at 1.3637.
• A collapse below 1.3500 could influence the pair to navigate the previous week’s low at 1.3479.

USD/CAD trims its intraday gains, struggling to recover recent losses despite the stronger US Dollar (USD). The USD/CAD pair trades higher around 1.3590 during the European session on Monday.

The robust employment data has sparked discussions about the future direction of the US Federal Reserve's (Fed) monetary policy and the duration for which the central bank intends to keep rates at restrictive levels. This surge in discussions could bolster the strength of the USD to test the psychological level at 1.3600, which acts as a strong barrier before the 14-day Exponential Moving Average (EMA) at 1.3606.

A breakthrough above the psychological barrier could provide support for the USD/CAD pair to explore the 38.2% Fibonacci retracement at 1.3637 followed by the major level at 1.3650.

The technical indicators for the USD/CAD pair support the current downward trend. The Moving Average Convergence Divergence (MACD) line is positioned below the centerline and the signal line, indicating a bearish momentum in the USD/CAD pair.

Furthermore, the 14-day Relative Strength Index (RSI) below 50 indicates a dovish sentiment, indicating that the USD/CAD pair could meet the support around the major level of around 1.3550, following the next psychological support level at 1.3500 level. A break below the latter could push the bears of the USD/CAD pair to navigate the region around the previous week’s low at 1.3479.

USD/CAD: Daily Chart

Economists at Rabobank expect the Euro to weaken in the coming months.

A weaker EUR could help support the reforms needed to boost the competitiveness of the EU

Citing sources, Bloomberg News reported on Monday that Bank of Japan (BoJ) officials see little need to abandon the negative interest rate policy (NIRP) this month.

The Japanese central bank hasn’t seen enough evidence of wage growth to justify sustainable inflation, the sources added.

developing story ...

Gold prices fell in India on Monday, according to data from India's Multi Commodity Exchange (MCX).

Gold price stood at 61,379 Indian Rupees (INR) per 10 grams, down INR 817 compared with the INR 62,196 it cost on Friday.

As for futures contracts, Gold prices decreased to INR 61,575 per 10 gms from INR 61,719 per 10 gms.

Prices for Silver futures contracts decreased to INR 72,450 per kg from INR 72,518 per kg.

Global Market Movers: Comex Gold price drifts lower for second day as March Fed rate cut bets recede

• The benchmark 10-year US Treasury yield rebounded from a three-month low after the upbeat US jobs data and lifted the US Dollar, which undermined the Comex Gold price on Friday.
• The US NFP report showed that the economy added 199K new jobs in November, surpassing estimates for a reading of 180K and 150K rise in the previous month.
• The US Bureau of Labor Statistics (BLS) reported that the Unemployment Rate dipped to 3.7% from 3.9% in October, despite a rise in the Labor Force Participation Rate.
• The data pointed to the underlying labor market strength and made traders bet that it could take the Federal Reserve until May 2024 to deliver the first interest rate cut.
• The US troops were targeted with rockets and drones at least five more times on Friday by Iran-backed militias in Iraq and Syria over its support to Israel amid a war in Gaza.
• The US embassy in Iraq's capital Baghdad was shelled on Friday after being attacked by 14 rockets earlier, increasing fears of a broadening conflict in the Middle East.
• Traders now look to this week's US consumer inflation figures and the Fed's interest rate projections for next year before placing aggressive directional bets.
• A rather busy week also features the Swiss National Bank (SNB), the Bank of England (BoE) and the European Central Bank (ECB) monetary policy meetings on Thursday.

(An automation tool was used in creating this post.)

USD/INR remains remarkably stable. Economists at Commerzbank analyze the pair’s outlook.

RBI content with stable rates and currency

FX option expiries for Dec 11 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts

• 1.0700 686m
• 1.0720 803m
• 1.0725 609m
• 1.0730 744m
• 1.0800 761m

- USD/JPY: USD amounts                     

• 144.25 456m
• 145.00 568m
• 146.00 951m
• 147.00 1.3b

- USD/CHF: USD amounts        

• 0.8900 412m

- AUD/USD: AUD amounts

• 0.6500 451m
• 0.6550 895m
• 0.6600 627m

• USD/MXN recovers its recent losses as US Dollar stays firm post upbeat US labor data.
• US NFP for November reported an increase of 199,000 jobs, and the US Unemployment Rate fell to 3.7%.
• Banxico is expected to hold cash rates at the level of 11.25%.

USD/MXN attempts to retrace its recent losses, hovering around 17.37 during the Asian session on Monday. The US Dollar (USD) receives upward support from the market sentiment that the Federal Reserve (Fed) won't implement interest rate cuts anytime soon. This sentiment is driven by the resilience displayed in the United States (US) labor market. The US Nonfarm Payrolls for November surpassed expectations with a significant increase of 199,000, and the Unemployment Rate dropped to 3.7% from the previous 3.9%, contributing to the prevailing confidence in the USD.

The latest Headline Inflation in Mexico increased to 0.64% in November from 0.38% in October but fell short of the market expectation of 0.72%. Meanwhile, Core Inflation eased at 0.26% against the 0.30% as expected and 0.39% previously. Additionally, Banxico's upcoming announcement of its key interest rate on Thursday is a notable event that could influence market movements. The prevailing expectation is that Banxico will maintain cash rates at the unchanged level of 11.25%. Investors will likely monitor the central bank's decision and any accompanying statements for insights into the monetary policy outlook.

The Bank of Mexico's (Banxico) officials have recently expressed a leaning towards easing monetary policy. However, dissent emerges within the ranks, notably from Banxico's Deputy Governor Irene Espinosa. She has pushed back, emphasizing that inflationary risks persist and are increasing. This underscores a divergence in perspectives within Banxico regarding the appropriate stance on monetary policy.

The rise in US bond yields, driven by speculations about the Federal Reserve's (Fed) expected rates trajectory higher, is fortifying the US Dollar (USD) and providing considerable support to the Greenback. The US Dollar Index (DXY) remains robust, maintaining a position above 104.00. The yields on 2-year and 10-year US bond coupons stand at 4.75% and 4.25%, respectively, by the press time.

Moreover, Investors are poised to closely watch the US Consumer Price Index (CPI) data for November on Tuesday. Market expects a slight decline from 3.2% to 3.1% in yearly CPI data. However, monthly CPI is anticipated an increase to 0.1%.

Leaving aside the Turkish Lira, the Forint was the notable underperformer among currencies in the central and eastern European region for the past three years. Economists at Commerzbank analyze EUR/HUF outlook.

EUR/HUF on a steady rising path later in 2024 and 2025

Here is what you need to know on Monday, December 11:

Financial markets stay relatively quiet early Monday as investors gear up for highly-anticipated macroeconomic data releases and central bank meetings later in the week. The economic calendar will not offer any high-tier data releases. In the late American session, the outcome of the 10-year US Treasury note auction will be watched closely by participants.

The US Dollar (USD) Index snapped a three-week losing streak as the upbeat November jobs report helped the currency preserve its strength heading into the weekend. Nonfarm Payrolls (NFP) in the US rose by 199,000 and the Unemployment Rate declined to 3.7% from 3.9%, the US Bureau of Labor Statistics reported on Friday. Early Monday, the USD Index holds steady at around 104.00. Meanwhile, the benchmark 10-year US Treasury bond yield continues to fluctuate above 4.2% and US stock index futures trade modestly lower on the day.

The data from China showed that the Consumer Price Index declined by 0.5% on a monthly basis in November, bringing the annual CPI inflation rate down to -0.5% from -0.2% in October.

EUR/USD touched its lowest level in three weeks below 1.0730 on Friday and ended up closing the week in negative territory. Early Monday, the pair consolidates the previous week's losses and trades above 1.0750.

GBP/USD moves up and down in a narrow channel at around 1.2550 to start the new week. On Tuesday, the UK's Office for National Statistics will release labor market figures for October.

After fluctuating wildly in the second half of the previous week on speculations that the Bank of Japan was preparing to move out of negative rates, USD/JPY gained traction and rose above 145.00 early Monday. 

Gold extended its weekly slide on Friday but managed to close slightly above $2,000. XAU/USD struggles to shake off the bearish pressure and tests that key level in the European morning on Monday.

• GBP/USD remains on the defensive around 1.2539 ahead of the FOMC, and BoE rate decision.
• The pair maintains the bearish outlook, holding below the 50- and 100-hour EMA; the RSI indicator stands in the bearish zone below 50.
• 1.2530 acts as an initial level; the immediate resistance level will emerge at 1.2590.

The GBP/USD pair remains under pressure below the mid-1.2500s during the early European session on Monday. Investors are in a cautious mood ahead of the key events in the US and UK this week. The Federal Open Market Committee (FOMC) rate decision on Wednesday and the Bank of England (BoE) rate decision on Thursday will be in the spotlight this week and could trigger volatility in the market. The major pair currently trades near 1.2539, losing 0.07% on the day.

From a technical perspective, GBP/USD maintains a bearish outlook as the pair holds below the 50- and 100-hour Exponential Moving Averages (EMAs) on the four-hour chart. The prevailing bearish sentiment appears in the Relative Strength Index (RSI), which remains below 50, indicating the path of least resistance is to the downside.

The lower limit of the Bollinger Band at 1.2530 acts as an initial level for GBP/USD. The key contention level to watch is a psychological round mark and a low of December 8 at 1.2500. Any follow-through selling will see a drop to a low of November 22 at 1.2450. Finally, the additional downside filter is a low of November 17 at 1.2374.

On the upside, the immediate resistance level will emerge at the 50-hour EMA at 1.2590. The next hurdle is seen at the upper boundary of the Bollinger Band at 1.2608. A break above the latter will see a rally to a high of December 5 at 1.2652, en route to a high of December 4 at 1.2712.

GBP/USD four-hour chart

• USD/CNH gains ground near 7.1960 on the cautious mood and downbeat Chinese data.
• The pair holds above the 50- and 100-hour EMA; RSI indicator stands in the overbought condition.
• The immediate resistance level is seen at 7.2100; 7.1776 acts as an initial support level for the pair.

The USD/CNH pair holds positive ground around 7.1960 during the Asian session on Monday. The cautious mood in the market and the weaker-than-expected Chinese data lends some support to the pair. Investors await the US inflation data due on Tuesday ahead of the Federal Open Market Committee (FOMC) rate decision on Wednesday for fresh impetus. The markets anticipate the US central bank to hold the rate steady at its December meeting.

Furthermore, the National Bureau of Statistics of China revealed on Saturday that China’s Consumer Price Index (CPI) dropped 0.5% YoY in November from October’s reading 0.2% decline. This figure came in worse than the expectation of a 0.2% decrease. Meanwhile, the nation’s Producer Price Index (PPI) fell 3.0% YoY in November versus a 2.6% decline prior, below the market consensus of a 2.8% decline in the same month.

According to the daily chart, USD/CNH holds above the 50- and 100-hour Exponential Moving Averages (EMAs), which means the path of least resistance for the pair is to the upside. The upward momentum is supported by the Relative Strength Index (RSI), which stands in bullish territory above 50. However, the overbought condition indicates that further consolidation cannot be ruled out before positioning for any near-term USD/CNH appreciation.

The immediate resistance level for USD/CNH is seen near a low of November 17 at 7.2100. Further north, the next upside barrier is located at a high of November 20 at 7.2248, en route to a low of November 15 at 7.2384, and finally a low of November 16 at 7.2427.

On the flip side, the 100-hour EMA at 7.1776 acts as an initial support level for the pair. A break below the latter will see a drop to the 50-hour EMA at 7.1662. The additional downside filter to watch is the lower limit of the Bollinger Band at 7.1503, followed by a low of November 28 at 7.1424.

USD/CNH daily chart

• USD/CHF moves sideways near the psychological level ahead of US inflation.
• Fed is expected to maintain interest rates at 5.5% during the policy meeting on Wednesday.
• Market expects the Fed to keep monetary policy tightened for a longer period as the labor market showed resistance.
• SNB is predicted to maintain policy rates at 1.75% in its upcoming meeting on Thursday.

USD/CHF hovers around 0.8800 during the Asian trading hours on Monday, grappling to extend its profits for the third successive session. The USD/CHF pair has been on an upward trajectory, propelled by positive employment data from the United States (US). The rise in US bond yields, driven by speculations about the Federal Reserve's (Fed) rates trajectory, is further strengthening the US Dollar (USD) and providing support to the USD/CHF pair.

The US Nonfarm Payrolls for November exceeded expectations with a substantial increase of 199,000, and the Unemployment Rate declined to 3.7% from the previous 3.9%. Additionally, the preliminary Michigan Consumer Sentiment Index for December showed a noteworthy rise, reaching 69.4, marking a significant increase from the previous reading of 61.3.

However, the consensus is that the Federal Reserve (Fed) will maintain interest rates at 5.5% during the upcoming monetary policy meeting on Wednesday. However, solid labor market conditions could put pressure on the Fed to maintain higher interest rates for a longer period. Investors are anticipated to closely scrutinize the US Consumer Price Index (CPI) data on Tuesday, anticipating potential market impacts.

On the Swiss front, the CHF experienced downward pressure following the release of seasonally adjusted Unemployment Rate data by the State Secretariat for Economic Affairs (SECO) last week. The report revealed that the total number of unemployed civilian laborers in November remained steady at 2.1%, consistent with previous figures.

Furthermore, the easing of the Swiss Consumer Price Index (YoY) for November at 1.4%, compared to the prior 1.7%, contributed to the depreciation of the Swiss Franc (CHF). The upcoming interest rate decision by the Swiss National Bank (SNB) on Thursday is expected to see the central bank maintaining policy rates at the unchanged level of 1.75%.

• Gold price remains under some selling pressure for the second successive day on Monday.
• Reduced bets for a March Fed rate cut move and a modest USD uptick weigh on the metal.
• Geopolitical risks could help limit further losses ahead of this week’s key data/event risks.

Gold price (XAU/USD) fell over 1.5% intraday and touched a two-week trough on Friday following the release of stronger-than-expected employment details from the United States (US). The closely-watched US jobs report showed strength across the board and pointed to a resilient economy, forcing investors to trim their bets for a 25 basis points (bps) interest rate cut by the Federal Reserve (Fed) in March 2024. This pushed the US Treasury bond yields and the US Dollar (USD) higher, which, in turn, weighed heavily on the commodity.

The selling bias around the Gold price remains unabated through the Asian session on Monday, though it lacks follow-through amid geopolitical risks. Traders also seem reluctant to place aggressive bets ahead of this week's key data and central bank event risks. The US consumer inflation figures are due on Tuesday, which will be followed by the crucial FOMC decision on Wednesday. The Swiss National Bank (SNB), the Bank of England (BoE) and the European Central Bank (ECB) are also scheduled to announce policy updates on Thursday.

The market attention will then turn to the release of flash PMI prints from the Eurozone, the UK and the US, which will offer fresh insight into the health of the global economy and provide some meaningful impetus to the Gold price. Nevertheless, the XAU/USD, for now, seems to have found acceptance below the $2,000 psychological mark and looks to a possible Fed pivot to prevent a deeper correction.

Daily Digest Market Movers: Gold price continues to be weighed down by reduced bets for a rate cut by the Fed in March 2024

• The benchmark 10-year US Treasury yield rebounded from a three-month low after the upbeat US jobs data and lifted the US Dollar, which undermined the Gold price on Friday.
• The US NFP report showed that the economy added 199K new jobs in November, surpassing estimates for a reading of 180K and 150K rise in the previous month.
• The US Bureau of Labor Statistics (BLS) reported that the Unemployment Rate dipped to 3.7% from 3.9% in October, despite a rise in the Labor Force Participation Rate.
• The data pointed to the underlying labour market strength and made traders bet that it could take the Federal Reserve until May 2024 to deliver the first interest rate cut.
• The US troops were targeted with rockets and drones at least five more times on Friday by Iran-backed militias in Iraq and Syria over its support to Israel amid a war in Gaza.
• The US embassy in Iraq's capital Baghdad was shelled on Friday after being attacked by 14 rockets earlier, increasing fears of a broadening conflict in the Middle East.
• Traders now look to this week's US consumer inflation figures and the Fed's interest rate projections for next year before placing aggressive directional bets.
• A rather busy week also features the Swiss National Bank (SNB), the Bank of England (BoE) and the European Central Bank (ECB) monetary policy meetings on Thursday.

Technical Analysis: Gold price seems vulnerable to slide further towards testing the 50-day SMA support near the $1,950 area

From a technical perspective, Friday's breakdown below the $2,012-2,010 area, representing the 61.8% Fibonacci retracement level of the November-December rally, could be seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart have been losing positive traction, which, in turn, supports prospects for deeper losses. Hence, a subsequent slide towards testing the 50-day Simple Moving Average (SMA), currently pegged around the $1,965-1,963 zone, looks like a distinct possibility. This is followed by the very important 200-day SMA, near the $1,951-1,950 region, which if broken decisively will set the stage for an extension of the recent sharp pullback from an all-time high touched last Monday.

On the flip side, the $2,010-2,012 support breakpoint now seems to act as an immediate hurdle ahead of the $2,030 level and the $2,040 supply zone. Against the backdrop of the occurrence of a golden cross, with the 50-day rising above the 200-day SMA, some follow-through buying will shift the near-term bias in favor of bullish traders. The Gold price might then climb to the next relevant resistance near the $2,071-2,072 region before aiming to reclaim the $2,100 round figure.

• EUR/USD rebounded from its three-week low at 1.0723.
• ECB is expected to keep the Main Refinancing Operations Rate unchanged at 4.5% in its upcoming meeting.
• Fed may maintain interest rates at 5.5% during the policy meeting on Wednesday.
• Solid US labor data triggered the discussion on the duration of tightened monetary policy by the Fed.

The EUR/USD rebounds from its three-week low at 1.0723, which was recorded on Friday. The EUR/USD pair trades higher around 1.0760 during the Asian trading hours on Monday. However, the US Dollar (USD) received an upward momentum after the release of stronger economic data from the United States (US).

The US Nonfarm Payrolls for November exceeded expectations with a significant increase to 199,000, while the US Unemployment Rate dropped to 3.7% from the previous 3.9%. Meanwhile, the German Harmonized Index of Consumer Prices (YoY) remained steady at 2.3% in November, in line with expectations, with monthly figures reflecting a 0.7% decline, similar to October.

Market anticipation suggests that the European Central Bank (ECB) will maintain the Main Refinancing Operations Rate at 4.5% in its upcoming monetary policy statement on Thursday. Furthermore, expectations point toward a commencement of interest rate cuts by the ECB in March 2024.

On the other hand, speculation surrounds the future trajectory of the US Federal Reserve's (Fed) interest rates and the duration for which policy rates will remain restrictive. However, the consensus expectation is that the Fed will keep interest rates at 5.5% during the upcoming monetary policy meeting on Wednesday.

The US Dollar Index (DXY) remains strong above 104.00, supported by positive US Treasury yields. At present, the yields on 2-year and 10-year US bond coupons stand at 4.24% and 4.73%, respectively.

Investors are expected to closely monitor the US Consumer Price Index (CPI) data on Tuesday for potential market impact. Additionally, the ZEW Survey – Economic Sentiment for December will be released by Germany, adding to the market's focus.

• Indian Rupee remains relatively quiet ahead of the FOMC meeting.
• The Reserve Bank of India (RBI) MPC decided to keep the rate steady at 6.50% at its December meeting.
• Investors will closely monitor the US inflation data ahead of the FOMC interest rate decision.

Indian Rupee (INR) trades flat with mild losses on Monday as traders prefer to wait on the sidelines ahead of the key US event. On Friday, the Reserve Bank of India (RBI) Monetary Policy Committee (MPC) decided to keep the interest rate unchanged at 6.50% while raising its growth forecast for the current fiscal year to 7% from 6.5% earlier. RBI’s Das said easing inflation across all components of retail inflation is one of the reasons behind the MPC's decision to keep the repo rate unchanged.

RBI’s Das further stated that the near-term picture is clouded by risks to food inflation, which might lead to higher inflation in November and possibly December. This should be monitored for potential second-round effects.

Investors will closely monitor the US inflation data, as measured by Consumer Price Index (CPI). The attention will shift to the Federal Open Market Committee (FOMC) meeting on Tuesday and Wednesday. In the meantime, RBI could support the Indian Rupee at 83.40 as oil companies and others would buy on dips in USD/INR.

Daily Digest Market Movers: The Indian Rupee remains resilient to external shocks amid better macro data, sustainable forex reserves, and investor inflows

• The Reserve Bank of India (RBI) governor Shaktikanta Das announced the Monetary Policy Committee decided unanimously to keep the policy repo rate unchanged at 6.5% and keep the focus on the withdrawal of accommodation.
• Das highlighted the Indian economy is resilient and has momentum, as reflected in the GDP growth for the second quarter of the ongoing financial year.
• Indian retail inflation is estimated at 5.4% in FY24. RBI also projected retail inflation in Q3 of FY24 at 5.6% and 5.2% in Q4.
• The forecast growth rate for India's GDP in FY24 is currently set at 7.0%, with growth rates forecast of 6.5% and 6.0% for the third and fourth quarters, respectively.
• India's foreign exchange reserves increased to $604 billion as of December 1, surpassing the $600 billion mark after a gap of about four months.
• US Nonfarm Payrolls (NFP) rose by 199K from October's increase of 150K and came in above the market expectation of 180K.
• Unemployment Rate declined to 3.7% from 3.9% in the same period, while Average Hourly Earnings remained steady at 4.0%, in line with the market expectation.
• The preliminary University of Michigan Consumer Sentiment Index for December arrived at 69.4 from 61.3 in the previous reading, the second-highest reading this year.

Technical Analysis: Indian Rupee trades flat with a slight positive bias

Indian Rupee trades flat on the day. The USD/INR pair has traded near the upper boundary of a trading range of 82.80–83.40 since September. According to the daily chart, USD/INR maintains its bullish vibes as it holds above the key 100-day Exponential Moving Average (EMA). Additionally, the 14-day Relative Strength Index (RSI) continues above the 50.0 threshold, bolstering the upward momentum.

That being said, a decisive break above the upper boundary of the trading range of 83.40 could pave the way to the next hurdle at the year-to-date (YTD) high of 83.47, followed by a round figure of 84.00. On the downside, the critical support level is seen at the 83.00 psychological round figure. A break below 83.00 will see a drop to 82.80, representing the confluence of the lower limit of the trading range and a low of September 12. The additional downside to watch is a low of August 11 at 82.60.

• NZD/USD trades lower around 0.6120 as US Dollar remains firm.
• Stronger US NFP data contributed support to underpinning the Greenback.
• US Fed is expected to maintain the cash rate at 5.5% in December's meeting.
• New Zealand’s GDP data for Q3 is expected to decline from the previous quarter’s growth.

NZD/USD extends its losses for the second consecutive trading session, bidding around 0.6120 during the Asian hours on Monday. The robust employment data has sparked an upward movement in US bond yields, contributing to the strengthening of the US Dollar (USD) and consequently exerting pressure on the Kiwi pair.

The US Nonfarm Payrolls for November showed a significant uptick, reaching 199,000 compared to October's increase of 150,000, surpassing the market expectation of 180,000. The US Average Hourly Earnings (Year-on-Year) remained stable at 4.0%, aligning with market projections for November. Furthermore, the Unemployment Rate dropped to 3.7%, down from the previous 3.9%. Additionally, the preliminary Michigan Consumer Sentiment Index for December rose to 69.4, marking a notable increase from the previous reading of 61.3.

US Dollar Index (DXY) attempts to gain ground for another session, trading above 104.00 at the time of writing. The yields on 2-year and 10-year US bond coupons stand at 4.24% and 4.73%, respectively.

Market participants speculate regarding the future trajectory of the US Federal Reserve's (Fed) monetary policy and how long the central bank plans to maintain rates at restrictive levels. However, the consensus expectation is that the Fed will maintain interest rates at 5.5% during the upcoming monetary policy meeting on Wednesday.

Investors will closely watch the US Consumer Price Index (CPI) data on Tuesday for additional insights and its potential impact on the market. Turning attention to the Kiwi's economic agenda, the Gross Domestic Product (GDP) data for the third quarter is scheduled for release on Thursday. Projections suggest a growth of 0.2%, a decline from the previous quarter's 0.9% expansion.

• WTI Oil prices ticks higher during the Asian session on Monday, though lacks follow-through.
• Signs of a resilient US economy fuel optimism over the demand outlook and lend support.
• China’s economic woes might cap any further gains ahead of the key central bank event risks.

West Texas Intermediate (WTI) Crude Oil prices edge higher during the Asian session on Monday and look to build on last week's modest recovery from the $69.00/barrel mark or the lowest level since June 29. The commodity currently trades just above the mid-$71.00s, up over 0.35% for the day, though lacks follow-through amid a combination of diverging forces.

The strong US Nonfarm Payrolls (NFP) data released on Friday pointed to a still resilient economy and prompted some optimism over the outlook for crude demand in the world's largest fuel consumer. This, in turn, is seen as a key factor acting as a tailwind for Crude Oil prices. Investors, however, remain sceptical that the recent production cuts announced by OPEC+ will be enough to offset rising supply from countries outside the cartel and waning global demand. This, along with weak economic data from top importer China, raises concerns over fuel demand and should cap any meaningful appreciating move for the black liquid.

In fact, China's General Administration of Customs reported on Friday that crude imports fell 10% from October to a four-month low in November. Furthermore, inflation data from China released over the weekend revealed that consumer prices last month recorded the fastest drop since November 2020. Adding to this, the Producer Price Index (PPI) marked the 14th straight month of decline. The data was seen as a reflection of weak consumer demand, warranting caution before placing aggressive bullish bets around Crude Oil prices. Traders might also prefer to wait on the sidelines ahead of this week's key central bank event risks.

Technical levels to watch

• USD/CAD seems to surpass the psychological level at 1.3600.
• Upbeat WTI price could provide support for the Canadian Dollar (CAD).
• Stronger US labor data have triggered discussions on the trajectory of Fed monetary policy.

USD/CAD recovers its recent losses as the US Dollar (USD) attempts to gain ground for the second successive day. The USD/CAD pair trades higher around 1.3600 during the Asian session on Monday. However, the stronger Crude oil prices could limit the losses of the Canadian Dollar (CAD).

West Texas Intermediate (WTI) extends its winning streak for the third successive session, trading higher near $71.60 per barrel during the Asian session on Monday. Crude oil prices experienced an upswing following the release of data last week, indicating a degree of resilience in the United States (US) economy. The robust US employment data on Friday played a significant role, portraying the labor market as one of the few positive aspects in the world's largest fuel consumer.

The US Nonfarm Payrolls for November exhibited a notable increase, reaching 199,000 compared to October's rise of 150,000 and surpassing the market expectation of 180,000. The US Average Hourly Earnings (YoY) remained constant at 4.0%, in line with the market's projections for November. The Unemployment Rate decreased to 3.7%, down from the previous 3.9%.

The robust employment data has stirred conversations regarding the future trajectory of the US Federal Reserve's (Fed) monetary policy and how long the central bank plans to maintain rates at restrictive levels. This surge in discussions has fueled an upward movement in US Treasury yields, contributing to the strengthening of the USD. Market participants are now focused on the US Consumer Price Index (CPI) on Tuesday and the Fed Interest Rate Decision on Wednesday for further insights and potential market impact.

• The Japanese Yen gives up some of its recent strong gains against the US Dollar.
• Reduced bets for an imminent shift in the BoJ’s policy shift undermine the JPY.
• The USD draws support from Friday’s better-than-expected US monthly job data.
• The market attention now shifts to the US CPI and the FOMC decision this week.

The Japanese Yen (JPY) kicks off the new week on a softer note amid reports that Bank of Japan (BoJ) Governor Kazuo Ueda's comments last week were taken out of context and not meant to signal anything about the timing of a policy change. Adding to this, the weaker GDP report pointed to Japan's still fragile economy, suggesting that market expectations of an imminent rate hike may be overblown. In contrast, stronger monthly employment figures from the United States (USD) made traders bet that it could take the Federal Reserve (Fed) until May to begin a series of interest-rate cuts next year. This, in turn, lends some support to the US Dollar (USD) allowing the USD/JPY pair to build on Friday's goodish recovery from mid-142.00s and gain positive traction for the second successive day on Monday.

Investors, meanwhile, seem convinced that the end to BoJ's decades of super-low interest rates may be nearing. This, along with concerns about a deeper global economic downturn, might continue to benefit the JPY's relative safe-haven status and cap any meaningful appreciating move for the USD/JPY pair. Traders might also refrain from placing aggressive directional bets ahead of this week's key data/event risks. The latest US consumer inflation figures are due for release on Tuesday and will be followed by the crucial FOMC monetary policy decision on Thursday. This would play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the major. Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have bottomed out.

Daily Digest Market Movers: Japanese Yen continues losing traction amid hopes that BoJ will delay exit from easy policy

• A Reuters report, citing three sources familiar with the matter, said that Bank of Japan Governor Kazuo Ueda's comments last week were not meant to signal an imminent policy shift.
• This, along with data showing that Japan's economy contracted more sharply than first estimated in the third quarter, by an annualized 2.9%, is seen undermining the Japanese Yen.
• The US Bureau of Labor Statistics (BLS) reported on Friday that the economy added 199K new jobs in November as compared to the 150K in the previous month and 180K anticipated.
• Additional details of the publication revealed that the Unemployment Rate declined to 3.7% from 3.9% in October, despite a rise in the Labor Force Participation Rate to 62.8% from 62.7%.
• Annual wage inflation, as measured by the change in Average Hourly Earnings, matched consensus estimates and held steady at 4% during the reported month.
• The upbeat US employment figures forced investors to scale back their expectations for an early interest rate cut by the Federal Reserve, as early as March 2024.
• Investors now look forward to the latest US consumer inflation figures on Tuesday, which could influence market expectations about a series of Fed rate cuts next year.
• The US central bank is also scheduled to announce its policy decision at the end of a two-day policy meeting on Wednesday and is anticipated to maintain the status quo.
• The market focus, meanwhile, will be on the so-called "dot plots" and Fed Chair Jerome Powell's comments at the post-meeting press conference.

Technical Analysis: USD/JPY recovers further from the multi-month low touched last Thursday, upside potential seems limited

From a technical perspective, the USD/JPY pair last week showed some resilience below the very important 200-day Simple Moving Average (SMA). The subsequent move beyond the 23.6% Fibonacci retracement level of the recent decline from the 152.00 neighbourhood, or the YTD peak, favours bullish traders. The momentum, however, paused ahead of the 38.2% Fibo. level during the Asian session on Monday, which if cleared should allow spot prices to reclaim the 146.00 mark. The momentum could get extended further, though is more likely to remain capped near the 50% Fibo. level, around the 146.80 region. 

Meanwhile, oscillators on the daily chart are holding deep in the negative territory and support prospects for the emergence of some selling at higher levels. That said, the 145.00 psychological mark might now protect the immediate downside ahead of the 144.55-144.50 area, or the 50% Fibo. level and the 144.00 round figure. Failure to defend the said support levels could make the USD/JPY pair vulnerable to accelerate the slide further towards retesting sub-143.00 levels, or the 61.8% Fibo. level. This is followed by the 200-day SMA, currently around the 142.35 region, the 142.00 mark and the 141.60 region, or the multi-month low touched last Thursday. Some follow-through selling below the latter will be seen as a fresh trigger for bearish traders and pave the way for a further near-term depreciating move for the USD/JPY pair.

• GBP/USD recovers some lost ground near 1.2550 on the consolidation of the US Dollar.
• The US Nonfarm Payrolls beat the market expectations in November, adding 199K new jobs to the US economy.
• The BoE is likely to keep borrowing costs at a 15-year high at its December meeting on Thursday.
• Investors will focus on the UK employment data and US inflation data, due on Tuesday.

The GBP/USD pair holds positive ground during the early Asian session on Monday. The pair recovers some lost ground from Friday’s low of 1.2500 and currently trades around 1.2551, gaining 0.03% on the day. The US Nonfarm Payrolls came in better than market expectations. Traders await the key events from the FOMC and BoE meeting this week and these events could trigger volatility in the market.

The Bank of England (BoE) governor Andrew Bailey said last month it was far too early to be thinking about rate cuts while warning there was “no room for complacency” on inflation despite a fall in the Consumer Price Index from 6.7% in September to 4.6% in October. The BoE is likely to keep borrowing costs at a 15-year high at its December meeting on Thursday.


The US Nonfarm Payrolls beat market expectations in November, adding 199K new jobs in the US economy from October’s print of 150K payroll additions. Furthermore, the Unemployment Rate declined to 3.7% from 3.9% while the Average hourly earnings remained unchanged at 4.0% YoY.

Last week, US Federal Reserve (Fed) Chair Jerome Powell said earlier this month that it would be premature to conclude with confidence that the Fed had achieved a sufficiently restrictive stance to tame inflation. Powell added that we are prepared to tighten policy further if it becomes appropriate to do so. Nonetheless, investors speculated that the upbeat US Nonfarm Payrolls (NFP) report may convince the Federal Reserve (Fed) to delay rate cutting in 2024.

Market players will keep an eye on the UK employment data, including Employment Change, Claimant Count Change, and ILO Unemployment Rate, due on Tuesday. Also, the US inflation data, as measured by the US Consumer Price Index (CPI) will be released later on Tuesday. The focus will shift to the US FOMC meeting on Wednesday and the BoE policy meeting on Thursday.

• Australian Dollar continues to move downward on the firm US Dollar.
• Australia’s chief policymaker Michele Bullock will deliver a speech on Tuesday.
• China's CPI declined by 0.5% in November both monthly and yearly.
• US NFP rose by 199,000 in November against the previous rise of 150,000.

The Australian Dollar (AUD) seems to extend its losses on Monday. The robust employment figures in the United States (US) bolstered the Greenback on Friday, exerting downward pressure on the AUD/USD pair. Furthermore, worries about deflation in China, coupled with a Consumer Price Index (CPI) and Producer Price Index (PPI) that fell short of expectations, contributed to a selling spree on the Australian Dollar (AUD).

Australia’s chief policymaker Michele Bullock, the Governor of the Reserve Bank of Australia (RBA), is scheduled to deliver a speech on Tuesday. The RBA opted to maintain the cash rate at 4.35% at its December meeting. While the RBA maintains a tightening bias, recent economic indicators suggest a likelihood of no further rate hikes in the near future.

US Bureau of Labor Statistics (BLS) revealed on Friday that November's US Nonfarm Payrolls (NFP) exceeded market forecasts. Simultaneously, the Unemployment Rate saw a decline during the same period. Consequently, there has been an upward surge in US Treasury yields, supporting the strengthening of the USD.

The stronger employment data have ignited discussions and speculations about the forthcoming path of the US Federal Reserve's (Fed) monetary policy and the duration for which the central bank intends to uphold rates at restrictive levels. The attention will be on the US Consumer Price Index (CPI) on Tuesday and the Fed Interest Rate Decision on Wednesday.

Daily Digest Market Movers: Australian Dollar moves downward on a negative bias

• China's Consumer Price Index (CPI) experienced a year-on-year decline of 0.5% in November, compared to a 0.2% decrease in October. On a monthly basis, Chinese inflation fell by 0.5%, surpassing the 0.1% decline observed in October.
• China's Producer Price Index (PPI) recorded a 3.0% year-on-year drop in November, reflecting a more substantial decline than the 2.6% decrease reported in October.
• US Nonfarm Payrolls for November rose by 199,000 against the previous rise of 150,000 in October and the market expectation of 180,000.
• US Average Hourly Earnings (Year-on-Year) held steady at 4.0%, aligning with market projections for November. Meanwhile, the Unemployment Rate dropped to 3.7% from the previous 3.9%.
• The preliminary Michigan Consumer Sentiment Index for December reached 69.4, a notable increase from the previous reading of 61.3.

Technical Analysis: Australian Dollar looks to reach the major level at 0.6550

The Australian Dollar trades lower around 0.6570 on Monday. The 21-day Exponential Moving Average (EMA) at 0.6553 could act as a key support, which is lined up with the major level at 0.6550. A break below the support region could put weight on the AUD/USD pair to navigate the area around 38.2% Fibonacci retracement at 0.6526 level. On the upside, the psychological level at 0.6600 would likely serve as a potential barrier.

AUD/USD: Daily Chart

On Monday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.1163 as compared to Friday's fix of 7.1123 and  7.1690 Reuters estimates.

• EUR/USD holds ground near 1.0770, up 0.06% on the day.
• The US labour market  may convince the Federal Reserve (Fed) to delay rate cuts in 2024.
• The market expected the European Central Bank (ECB) to hold rates until the inflation will return to target in a timely manner.
• Traders will monitor US inflation data ahead of the FOMC, ECB monetary policy meeting.